Morning Commentary: 68% and Dropping

Foreign Exchange - Morning Commentary

68% and Dropping

Share this story:
Facebook
Twitter
LinkedIn
Email
Alan Rose
Alan Rose
Foreign Exchange Head Trader
All the way back to October 1, 2018 market psychology was in a totally different place than where we are today. Back on October 1, U.S. economic performance was stellar and equity markets were taking in stride much of the negative news that is hammering U.S. and global equities today. On October 1, the probability of the Fed raising interest rates in December was 98%, with many forecasts calling for two or three more Fed rate increases in 2019.
 
This morning the probability of the Fed raising interest rates in December has dropped to 68% with many economists and forecasters backpedaling away from calls for more Fed rate increases next year. Markets are always looking forward and can turn on a dime. In a relatively short period of time, equity markets have shifted gears from optimism to pessimism as investors and traders cannot seem to squeeze through the exit doors fast enough.
 
What has changed to turn the markets upside down? Too many people that thought equities would be permanently ordained to rise are getting squeezed out…what appeared to be an equity correction like so many in the past is turning into a bear market in many sectors. But the most important reason lies with Fed and other central banks removing all the monetary stimulus, reducing their balance sheets, and normalizing interest rates that has been the fuel for much of the spectacular equity performance since the end of the Great Recession.
 
What all this means for the U.S. dollar is not clear at this time. The U.S. dollar remains a safe haven currency during these troubling times and the strength of the U.S. economy (relative to its peer group) and fallout from equities are disconnected at this time. While expectations haven fallen sharply regarding the Fed’s future rate path, U.S. interest rates have not fallen very far. We anticipate further volatile and choppy times ahead for the foreign exchange market and continue to advise importers and exporters to remain tactical and not strategic.
HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT:
  • U.S. Housing starts for October came in at expectations at 1,228,000. The underlying data was disappointing as single family starts fell for the second straight month and permits, an indicator for future construction, fell 0.6%. Multifamily starts, apartment buildings and condominiums, rose by 10.3%.
If we can help you with any Foreign Exchange needs, please email foreignexchange@cnb.com or call (800) 447‑4133.
Want to learn more about international finance, economics, and global events? Sign up for our other Foreign Exchange emails and videos!
Follow City National Bank on social media:
Facebook Twitter LinkedIn Google Plus YouTube
Investment and Insurance Products:
Are Not insured by the FDIC or any other federal government agency
Are Not deposits of or guaranteed by a Bank or any Bank Affiliate
May Lose Value
This report is for general information and education only and was compiled from data and sources believed to be reliable. City National Bank does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors as of the date of the report with no obligation to update or notify of inaccuracy or change. This report is not a recommendation or an offer or solicitation to buy or sell any financial instrument discussed. It is not specific investment advice. Financial instruments discussed may not be suitable for the reader. Readers must make independent investment decisions based on their own investment objectives and financial situations. Prices and financial instruments discussed are subject to change without notice. Instruments denominated in a foreign currency are subject to exchange rate and other risks. The Bank (and its clients or associated persons) may engage in transactions inconsistent with this report and may buy from or sell to clients or others the financial instruments discussed on a principal basis. Past performance is not an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting.
Unsubscribe from this list  |  Update email preferences
This message has been sent to bank@banking.offers.report. Please do not reply to this email. To ensure the delivery of future emails, please add foreignexchange@emails.cnb.com to your email address book or safe sender list.
Copyright ©2018 City National Bank – All Rights Reserved.
350 South Grand Avenue, 12th Floor, Los Angeles, CA 90071
City National Bank is a subsidiary of Royal Bank of Canada.
TERMS & CONDITIONS  |  PRIVACY STATEMENT
Equal Housing Lender
NMLSR ID# 536994 | City National Bank Member FDIC
                                                           

Comments

Popular posts from this blog

Fidelity: Bollinger band stock signal

Viewpoints: What to do after a data breach